'Racking' Retailers' Nerves

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'Racking' Retailers' Nerves

Convenience store operators everywhere will tell you their store employees are constantly strapped for time. Each workday seems to turn into a struggle to find the minutes necessary to accomplish all that needs to be done.

Yet lately, store personnel are having to add another task to the growing to-do list. As more and more magazine distributors do away with full service, periodicals is increasingly becoming a category that needs to be maintained at the store level, and it's got some retailers slimming down their magazine racks.

"It's getting harder and harder to manage it," said Glenn Loiselle, category manager for Rockland, Mass.-based Tedeschi Food Shops Inc. "It's not as simple as Lays potato chips where a shipment comes in, you find the space, label the rack and that's it."

Periodicals, he said, is much more time-consuming since a store can receive 20 to 40 different publications a day that need to be placed on the shelves.

"It becomes more of a maintenance issue for the store and they have enough to do," Loiselle commented. "It's enough to find time to keep the store stocked, let alone have to do something with magazines."

Convenience stores' share of the retail magazine market has declined from 16 percent to 7 percent over the past decade and for mom-and-pop outlets, it's practically non-existent, according to data from Magazine Publishers of America's Retail Growth Initiative, a program aimed at bringing new life to magazine sales in the retail industry.

Convenience Store News' 2005 Industry Report shows publications comprise 0.9 percent of in-store sales, with total industry sales in 2004 amounting to $1.2 billion. The average gross margin is nearly 20 percent.

Economics has forced wholesalers to withdraw service from a number of convenience stores because it isn't cost effective to service such small volumes, said Peter Kreisky, chairman of The Kreisky Media Consultancy Inc. in New York.

He said a lot of this emanated from the consolidation of the magazine wholesaler sector that took place between 1995 and 1996. During that time period, the number of magazine wholesalers went from roughly 340 to about 60 — of which just four represent more than 90 percent of the volume today, according to Kreisky.

"They were faced with some pretty significant financial situations," he explained. "Some of them were more aggressive than others in cutting back on service levels."

Doing Without

Tedeschi Food Shops' supplier, Hudson RPM Distributors, stopped providing full service nearly a year and a half ago. At first, Loiselle said the company tried their best to maintain the periodicals category as it was, but it got to be too much to handle.

The 202-store chain trimmed the category in its stores by approximately 15 percent. Over the course of a year, now stores carry 300 to 360 different titles, though Loiselle said that number will vary depending on the stores' demographics and space limitations.

About 10 to 15 percent of the magazine selection varies from store to store. The company works with a consulting firm, which provides a rundown of the top 100 to 200 magazines based on demographic information, to determine which titles to carry. Selection also varies based on geographic locations and even times of year.

"And you don't have to be a rocket scientist to see what's selling," Loiselle added.

When it comes to maintaining the magazine racks, the responsibility now lies at the store level with either the store manager, a clerk — or sometimes both, depending on the day. Loiselle said it can be a challenging job since the product is time sensitive.

"It's not a perishable product, but it is," he said. "It's hard to train someone to take as much pride like the supplier would be able to do. If someone could corner the market on managing that area for a reasonable dollar, they would make a million dollars."

Beginning this month, another c-store operator — this one in the Southeast — is also having to manage without full service now that its supplier no longer offers the option.

Before, officials with the chain said the supplier would come into the stores once a week, bring in new product, merchandise it, remove the old product and process returns. Now, the whole cycle is being handled internally and it's a significant time investment.

To compensate, the retailer plans to cut the number of SKUs it carries in the category. Currently, a standard magazine rack in its stores holds about 80 to 90 different titles. Going forward, that number will be reduced by half.

In reducing the SKUs, there is some concern over lost sales as is the case whenever you decrease product, according to company officials. But they don't expect that great of a hit given that roughly 20 titles make up 80 percent of the total magazine sales.

The company will continue to use scan data to decide which titles to sell. Sophisticates make up a large portion – roughly 60 percent – of the total magazine sales. The retailer said it also considers that certain titles sell better at certain times of year. For example, hunting magazines do well during hunting season, while sports magazines like ESPN and Sports Illustrated sell very well before football season begins.

New titles launched in the marketplace do make their way onto the racks from time to time, but the retailer said it isn't practical to be changing constantly.

"Every new magazine that comes out, we don't put on the rack," one official said.

Especially since there are more than twice as many titles than a decade ago.

Bill Busking, supervisor for C&F Food Stores Inc., said they leave it up to the professionals to decide what titles will sell best in their eight stores.

"Magazine distributors know more about magazines than we do," he said, citing that as one of the benefits of having a supplier who still provides full service.

The Grand Junction, Colo.-based chain switched distributors a few years ago when its former vendor, Anderson News, stopped offering full service. Kent News now supplies C&F stores, where magazine sales make up 3 percent of the total in-store sales.

When it comes to the periodicals category, Busking said full service is vital. "It's less hassle," he explained. "It just takes a little of the work out of it for the store managers as well. A lot of the managing is out of our hands."

In addition to the 50-plus SKUs each store carries, C&F expanded its periodicals category this year by adding a secondary seasonal rack, which Busking said is working out quite well.

In August, the rack features football-related magazines. In October, it's hunting, and come spring, the displays focus on biking and other outdoor activities.

The strategy, he said, is to gain impulse sales and make the customers aware that they do carry magazines that cater to what's going on right now.

"As far as magazines go, it's an impulsive category," he said.

A New Way of Thinking

It's this type of thinking, though, that Kreisky said is ineffective. He believes c-store retailers in the U.S. could benefit from thinking in the same way U.K. c-stores do, where the largest seller of periodicals is a c-store chain that makes the category the core product to generate traffic in its stores, whereas, U.S. c-stores traditionally see magazines as add-on purchases. Tedeschi's Loiselle said they do rely on magazines for generating traffic, but agreed they're viewed as an add-on purchase.

Some U.S.-based c-store retailers approach the periodicals category as a staple, but it's not a destination item unless a specific news event happens. In those rare instances, these chains will try and target customers by setting up special displays.

When it comes to the retail magazine market, c-stores are important for certain categories of magazines, such as the news magazines, celebrity titles, tabloids and sophisticates, according to Kriesky. But he said there's a far greater potential there.

He points to Dallas-based 7-Eleven Inc., as a prime example of a c-store operator making magazines a destination and driving customer traffic.

The chain carefully designs, refines and leverages the category, using store-by-store category management to tailor product assortment to customer demographics, Kriesky explained.

"7-Eleven is looking at magazines to get customers in on a regular basis," he said, adding that other stores could benefit from this type of fresh thinking. But Loiselle said magazines are a hard category to promote. "It's not a purchase where someone sits at home saying I have to go buy a magazine," he said.

Despite its challenges, though, Loiselle said periodicals is a must-have. With an average ring of $4.50, he said it's hard not to devote at least a small section of the store to it. Plus, it fits in with the mantra of giving customers what they want, when they want it.

"In this business, you've got to have that edge," he said.